Networx delays could force GSA to extend existing telecom contracts

Sole-source awards and higher fees for agencies are possible, industry representative says.

Federal agencies' lack of progress in transitioning to the government's massive Networx telecommunications contract could force the General Services Administration to negotiate temporary contracts with higher rates and fees, according to an industry expert.

Diana Gowen, senior vice president and general manager for Qwest Government Services, said despite some increased activity around telecommunications services, vendors are in a "hurry up and wait" situation as agencies slowly transition to the new contract. The pace could leave GSA with little choice but to negotiate sole-source contracts to extend existing telecom contracts temporarily and to raise fees to agencies to encourage progress, she added.

Lawmakers, federal officials and industry representatives have criticized the slow transition to Networx, which is valued at $68 billion over 10 years, making it the largest federal telecom contract in history. It offers more advanced technology and services than its predecessor, FTS 2001, which expires in June 2011. Networx offers lower prices for certain communications services, and the delays in moving to the contract are costing the government $22.4 million a month.

Karl Krumbholz, director of the network services program at GSA's Federal Acquisition Service, said he expects the transition to be 80 percent to 90 percent complete by June 2011, though he acknowledged a few agencies will be unable to meet that deadline.

"It's a horrible conundrum where nobody has a hammer," said Gowen. "Right now the only lever that [GSA] could possibly come up with is an extension of FTS 2001 and increasing fees to agencies. Is that enough to create enough pain in expense budget lines that they do something?"

Sole-source contracts and fee changes are among the tools at GSA's disposal to push the transition, but the agency hasn't been specific about exactly what it will do and when, said Jeff Mohan, executive director of the Networx program at AT&T Government Solutions. The cost to both government and industry will depend on which agencies and products are allowed on the contracts.

"The dilemma that GSA has is that they are a service provider and agencies are their customers," Mohan said. "They have to walk a fine line between providing service to their customers and doing the best thing for the government as a whole."

To date, more than 60 percent of FTS 2001 services have been disconnected, the measure used to determine transition progress. But progress varies by agency. GSA reported in July that the Energy Department had disconnected 96 percent of FTS 2001 services, while the Treasury and Agriculture departments had disconnected 32 percent and 11 percent, respectively.

Gowen said measuring the percentage of disconnected services gives a false sense of success.

"In the world of counting widgets, if you take all of your calling cards and your voice lines that are single access lines or switched voice service, there are hundreds of thousands of them," she said. "Those are the easiest things in the world to make a transition on. The harder things are data networks."

The Interagency Management Council, which oversees government telecommunications programs, recently decided to waive upcoming deadlines for agencies that haven't transitioned to Networx as long those agencies can demonstrate a clear plan and timeline for moving forward. Agencies must submit all transition orders by Aug. 31 to receive transition reimbursement credits. According to Krumbholz, 26 agencies have completed initial orders and three have been granted extensions. Agencies that do not apply for waivers will not be eligible for reimbursement, he said.

Gowen said one concern is companies could raise prices when negotiating sole-source contract extensions with GSA, a move prohibited in the last round of contract extension talks. "We really need to take a look at lessons learned so on the next go-round, which will eventually come about, [we] have a better process going forward for the future," she said. Coordination between the Office of Management and Budget and the CIO Council could provide agencies the push necessary to transition in a timely manner. Gowen also acknowledged agencies often lack the technical and contracting resources to complete the transition, forcing them to push off the work even as deadlines approach.

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